Yahoo just reported its fourth-quarter earnings, which beat on revenue ex-traffic acquisition costs (TAC) and on earnings.

Yahoo CEO Marissa Mayer is in the middle of a turnaround effort at the media giant, most recently bringing PayPal alumnus Max Levchin onto the board. Delivering a slight beat is a good start to that: Shares are up 4.1% after-hours, and the stock has risen about 26% in the past six months.

Now for the less-than-positive news: In the latest quarter, revenue from Yahoo’s core display-ad business fell 3.5% while total search ad revenue improved 3.8%. The number of ads sold on core Yahoo properties fell about 10% year-over-year in the fourth quarter and was up 3% sequentially, the company said.

Yahoo reported 32 cents in EPS and $1.22 billion in revenue ex-TAC, a 4% increase year-over-year in the fourth quarter.

We’ll find out more about her plans on the earnings call, which starts at 5 p.m. ET.

Q: What do you think the level of commercialization of Yahoo products is? Does the level of commercialization need to be taken down first for users?

Mayer: On the whole, no. I’m a very active user of the site myself and I think the ads add a lot to the overall user experience. Every now and then we see a property where the ads don’t enhance the experience. Mail is an example. Interestingly, what we’ve seen there, the product now has fewer ads but the ads that remain are delivering more value to our advertisers and have increased clickthrough links. We haven’t been able to reprice, but it is something we’re looking at.

Q: What are the key metrics for us to track, to gauge Yahoo’s success in mobile?

Mayer: In terms of metrics to track for mobile, we are not breaking it out separately right now. We’re offering new metrics right now, price per click and paid clicks. Here, I really believe this is about the user migration to mobile and the fact that we have 200 million MAUs for mobile, I would look at the overall numbers there, the revenue will follow. Why display was weaker, you look at these new metrics, impressions were down but they were reasonably stable down throughout the year. One of the reasons that happened is because we had really excellent opportunities, particularly around the Olympics. Obviously we’re working really hard on the number one business challenge: increasing engagement.

Q: Given your comments on investment in engagement, should we expect you to provide engagement metrics like minutes, or continue to rely on third-party?

Mayer: For us, it’s important that we provide accurate measurements. Overall, the standard is very challenging in terms of accurately providing the number of minutes per user. You don’t know exactly how long someone looked at it. There are some mediums like video where you can accurately get that information, it’s a difficult number to provide.

In terms of volume and engagement, the two metrics are the number of paid clicks, because as we get more search and more search share, the number of paid clicks goes up. The other is the number of ads sold. More pageviews allows us to sell more ads.

Mayer: Overall in search, it’s a key area of investment for us. We are really excited and happy to be working with Microsoft on the overall search alliance. The teams are working incredibly well together, we saw some nice increases in the key metrics. We need to invest in a lot of interface improvement, all of the innovations in search are going to happen at the user interface level. Both desktop and mobile will be key plays for us. Siri, on iPhone, they actually use Yahoo’s data and there’s nice links to our services from there. We’ll be very focused here.

Mayer: I don’t think of them as two separate platforms. For most people, they’re really a system of applications. Most people who use Yahoo Finance will say they use it both on desktop and on mobile and go back and forth. It’s important that we make it clear that it’s Yahoo Finance on the destkop and on the phone and tablet, and it’s really easy to switch back and forth. I do think in some of the key daily habits we’re addressing there will be innovation on desktop. I also think there’ll be innovation on the phone. For example, group communication on the desktop is not the same as group communication on the phone.

Q: Those dozen products, you mentioned the two, Mail and Flickr, can we know any others that could use a tune-up?

Mayer: Again, I would rather have some internal flexibility around how to operate, they are just an approximate dozen areas, so it may not map to a dozen applications. But there’s no surprise, it’s things like Mail, search and home page — those are the three big entry points. There are verticals where Yahoo has always been strong, things like Finance, Sports, News. Thera are a few others.

Q: How do you compete in effectiveness when you’ll likely be outspent in innovation?

Mayer: On research and development, we’re investing in fast, nimble, small teams. A lot of times we can take a small team of people and put them on the iOS team. We can have a different team for iPad, iPhone, Android, we have small teams. I think there’s a great quote, which I’ll probably get somewhat wrong: “Don’t think that a small number of people can’t change the world. In truth, no one else ever has.” Everything starts with a small team. We think they’ll end up changing our products and our user base, and hopefully the world for the better.

Mayer: In terms of paid click acceleration, there’s a few things playing into that. Not surprisingly, Q4 is a very commercial quarter, we think a lot of the increased clicks had to do with users actually clicking on multiple ads in the same search. There was a lot of additional paid clicks. Moving forward, we actually think for Q1, some of that commercialism will subside. We hope we can keep the paid clicks high and growing by actually gaining search share.

Mayer: Obviously we have a large mobile web offering, they tend to use Yahoo Finance, OMG. Most of our applications and mobile web experiences have search boxes. Also, you can change who your default search provider for me. Every time I use a search box in Safari, I end up doing a Yahoo search, for example.

Q: Just going back to the ad technology, can you talk about what percentage of the revenues would be for third-party publishers. Also, is there anything that you can point to that provides Yahoo with some differentiation in terms of competing in mobile?

Mayer: Here, I think that basically mobile monetization is new for everyone. It’s not entirely clear that everyone has a great answer yet. But I believe when users migrate en masse, there will be monetization opportunities that add to the user experience. It’s usually a combination of getting the right format, pricing and dynamics to encourage quality ads to match with user activities. For a long time, search wasn’t a money maker, which is almost absurd now looking back. But when you get the right pieces, you end up with a really lucrative model. I think something similar will happen to monetization in mobile, but you have to do a lot of experimentation to find it.

Q: On the last call you mentioned shifting engineers to mobile. Can you update us in that area? Do you think there’s a risk to your position in mobile assuming rising mobile usage in search cannibalizes desktop?

Mayer: It’s incremental to desktop. There may come a point where cannibalization happens, and we’re positioning ourselves to understand mobile. In terms of having 50% of our engineering staff on mobile, I think this is something that’ll happen. To date, we have started to shift some of our engineering teams to be more focused on mobile, we need to get to a critical mas on that. We’ve nicely grown the area with the fact that we hired 120 new computer science degrees in Q4, and those people are largely being allocated to new areas.

Q: You talked about reorganizing the sales force, can you offer any commentary where you see the greatest opportunity?

Mayer: I think what we really see by organizing around verticals is the opportunity to look at best practices and look at what’s working. Where should these ads for consumer packaged goods be placed. When you see those opportunities, it’s really great to bring them in and offer them to people in the same vertical. That’s the type of optimization we can see. In terms of particular verticals, I do think there’s all kinds of opportunities. Consumer packaged goods is one of them, but the advertising dollars are flowing online across all verticals.